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(Sharecast News) - Shares in Next were rising strongly on Tuesday after the high street retailer raised its full-year outlook, but it wasn't enough to change Shore Capital's 'hold' rating on the stock, with the broker highlighting ongoing weak consumer confidence.
The company said that full-price sales rose 10.6% year-on-year over the nine weeks to 27 December, comfortably ahead of forecasts for a 7% improvement across the entire quarter.
As a result, the company now expects total group sales in the year to 31 January to increase 10.3% to 6.97bn and pre-tax profits are expected to rise 13.7% to 1.15m, ahead of previous guidance of 6.87bn and 1.14bn, respectively.
Commenting on the performance, Shore Capital highlighted the strong showing from the UK label (third-party brands) and international online divisions, as well as the "encouraging" growth seen from the Next brand in the UK.
However, the broker sounded "a note of caution on the UK", predicting a continuation of the weak consumer sentiment flagged by the company back in October, when chief executive Simon Wolfson said that pressures on UK employment are likely to "filter through into the consumer economy as the year progresses".
"This caution is understandable, following what were virtually perfect trading conditions last spring the apparel sector will be facing into tough comps in the first half of 2026. Meanwhile the 4.1% increase in the NLW will see labour costs rise again, consumer confidence remains subdued and unemployment is on the rise. While we expect the excellent Next to continue do better than most, this tough backdrop may make future upgrades harder to come by," Shore Capital said.
The broker said that, despite recent weakness in the stock, the shares still trade at a premium with a price-to-earnings ratio of 17.5 on 2026 estimates.
"Though we remain long-term fans of the company, at this price, and with the cautious outlook on the UK, we are happy with our fair value to 14,750p and our corresponding 'hold' recommendation."
The shares were up 3% at 13,997.5p by 1143 GMT.